Tuesday, January 31, 2012

USNRC and EPRI Announce New Seismic Source Characterization Model for NPPs

The US Nuclear Regulatory Commission (USNRC), together with the Electric Power Research Institute(EPRI) and the US Department of Energy (USDOE) today released details of a new model for calculating the seismic risk for Nuclear Power Plants (NPPs) in the Central & Eastern United States (C & E US). This replaces the EPRI Report NP-4276 Seismic Hazard Methodology for the Central and Eastern United States of July 1986; and the Lawrence Livermore National Laboratory Model, Seismic Hazard Characterization of 69 Nuclear Plant Sites East of the Rocky Mountains, (Bernreuter, D.L., et al., 1989, NUREG/CR-5250, Volumes 1–8), and is the result of a 4-year long joint EPRI-USNRC project to revise the ground motion estimates that can be expected at a given NPP location in the C&E US.

Speaking broadly, the new model results in a greater ground motion for a given NPP location, and the greatest increases in ground motion estimates have been obtained for nuclear power plants in the vicinity of the New Madrid (TN) and Charleston (SC) fault systems, based on a 7-plant sample selected for detailed study by the USNRC. The new, higher ground motion estimates do not by themselves translate to a higher nuclear safety risk for NPPs at those locations - each NPP must re- calculate its safety risk based on details of its own design and plant layout, relative to the enhanced ground motion risk it faces.

The USNRC is asking the NPPs it regulates to re-evaluate their seismic risk based on this new model, and the model will also be used in assessing the seismic risk for new nuclear plants in the region during the new licensing process. While the new seismic and ground motion risk estimates have been in development for the last several years, the Commission direction in this regard is also part of regulatory initiatives in response to the events at the Fukushima nuclear power plant following the Tohoku earthquake and tsunami-following, on 11 March 2011.

Tuesday, January 24, 2012

World Economic Forum Global Risks Report 2012

The World Economic Forum Annual Meeting begins in Davos-Klosters, Switzerland, tomorrow, January 25 2012. In advance of the meeting, the Forum has published its 7th Annual Global Risks Report, created with its partners - Marsh & McLennan, Swiss Re, the Wharton Center for Risk Management, and Zurich Financial Services.

A most interesting read, the report develops 5 major global risk categories – Economic, Environmental, Geopolitical, Societal and Technological, and reports results of a broad survey of risk perceptions among representatives from 5 broad categories of Stakeholder Groups – Business, Academia, NGO, Government, and International Organization. Within the 5 risk categories are a total of 50 risk scenarios, roughly 10 in each risk category, each differing in likelihood and impact – e.g., in the Economic risk category: Chronic Fiscal Imbalances is considered to have the highest likelihood-impact combination; while Major Financial Systemic Failure is considered less likely, but considered to have the highest impact. Unmanageable Inflation or Deflation is considered least likely, while Unforeseen Negative Consequences of Regulations is considered to have the least impact.

The report proceeds to define, in each of the 5 Risk Categories, a Center of Gravity (CoG) – as the risk scenario with the highest (judgment-weighted) combination of likelihood and impact. Thus, the Economic Risk CoG is Chronic Fiscal Imbalances, while the Environmental, Geopolitical, Societal and Technological CoGs are respectively Rising Greenhouse Gas Emissions, Global Governance Failure, Unsustainable Population Growth and Critical Infrastructural Systems Failure. The survey also included a feature where respondents could write in ‘X-factors’ – risk scenarios that had unknown likelihood and impact, but which were nevertheless felt important enough to be thought about. This resulted in risk scenarios such as Volcanic Winter, Mega-accidents, and Neotribalism.

The report develops a series of risk constellations, where the cascading effect of different consequential risk scenarios across the 5 categories is explored. Three major cases are examined – a socio-economic dystopia, a governance dystopia and a technological dystopia, in each case setting out the different combinations of the 50 risk scenarios which could lead to each. The concept of 'critical connectors' is elucidated as the set of risk scenarios which link to the CoG of more than one risk category. Four critical connectors, all of them Economic risk scenarios, link 3 or more of the 5 CoGs.

Finally, the report presents detailed data and analyses of the Survey itself, and I found the data on the differential risk perceptions across the 5 Stakeholder groups, as well as across geographic affiliations particularly interesting. For example, on geographic variation, Europeans rank Chronic Fiscal Imbalances more likely than Middle Easterners and North Africans; while Asians see Unmanageable Inflation or Deflation as more likely than either Europeans or North Americans. Across stakeholder classes, Business saw the likelihood of Negative Consequences of Regulation as being higher than did Academia, while NGOs saw Negative Consequences of Nanotechnology as being more likely than did Academia.

Even more interestingly, subject matter experts (across the 5 stakeholder classes) ranked the likelihood of the scenarios within their area of expertise (among the 50 risk scenarios) higher than generalists across the board (with the exception of nanotechnology, where generalists ranked the likelihood of unforeseen negative consequences higher than subject matter experts). This is very interesting, in that, on macroeconomic, socio-economic or environmental issues, where the risk is more easily grasped by generalists, the general level of concern appears lower than might be warranted, while on 'esoteric' technological issues,which by their nature are harder to properly grasp, the general level of concern appears higher than might be warranted strictly on an existing-knowledge basis.

I have sketched here a rather broad summary of the report, but it is well worth a detailed read. In addition to the themes I have outlined, the report also contains a Special Section on the Great East Japan Earthquake of 11 March 2011 (the Tohoku quake). In the video clip below, David Cole, Chief Risk Officer at Swiss Re, talks about the WEF's Global Risk Report 2012. He points out that risk assessments conducted by governments and companies in the past have been inadequate, subjecting nations to extreme economic risks. He urges that a Country Risk Officer be appointed for each country, who would aggregate and prioritize different kinds of risks, and bring them to the attention of policymakers.

In another clip within the same playlist, Axel Lehmann, Chief Risk Officer of Zurich Financial Services emphasizes that no single individual, company, or even government can fully appreciate all aspects of the risks involved, and urges, on as many levels as possible, the formation of public-private partnerships for risk identification, analysis and mitigation. Erwann Michel-Kerjan, Director of the Wharton Risk Management Center, in another clip, points out that for high level decision makers, it is necessary to become familiar with all kinds of risks, not only the ones that their training or background predisposes them to consider. He emphasized also that the other side of risk is always opportunity, and the winners are those who not only protect themselves from the negative consequences of risk events, but those who positively profit from them :

Saturday, January 21, 2012

Next Steps in Seismic Hazard / Earthquake Loss Assessment Models

Just as the events at the Fukushima nuclear plant following the Tohoku earthquake of 11 March 2011 pointed to new directions in nuclear plant safety assessment (see my earlier blogpost), so also the property/casualty losses following the quake point to logical next steps in earthquake CAT loss models.

The recent Swiss Re Report on Lessons from Recent Major Earthquakes highlighted a number of ways that CAT Models could improve their loss estimates for portfolios insured against earthquakes. Emphasizing first of all that 2011 set the record both for total economic losses from earthquakes ($ 226 B) and for insured claims ($ 47 B), it underlined that the Tohoku earthquake of 11 March 2011, with insured claims of $35 B, was the most expensive natural CAT of all time, not just among earthquakes, but all natural CATs.

Next, the report turned to perceived inadequacies in current generation CAT loss estimation models. The Swiss Re report pointed out that while most CAT models used by property/casualty underwriters appeared to have adequately modeled property losses following from ground shaking alone, they typically underestimated (if they modeled them at all) the losses resulting from secondary loss agents – (i) the tsunami(s) following, (ii) the seismic aftershocks, (iii) soil liquefaction (iv) business interruption (BI) and (v) contingent business interruption (CBI). Losses due to fires following earthquakes, another secondary loss agent, however, appear to be well modeled.

Tsunamis Where CAT modelers had considered tsunamis following quakes, the height, consequent inland penetration, and damaging force of the tsunami were underestimated. This was true both in the Tohoku quake in Japan, as well as with the recent earthquakes in Chile.

Seismic Aftershocks
A major seismic event is often followed by aftershocks for a considerable period afterward. In some cases, a single aftershock can be more damaging than the original event; and very often the cumulative impact of the aftershocks is greater than that of the original event. Such cumulative effects and the clustering of smaller magnitude events following the original quake are important contributions to total losses, and need to be modeled more carefully.

Soil Liquefaction
This is a phenomenon where, after an earthquake, the soil loses its normal resistance to plastic deformation, and begins to flow like a fluid with a temporal and spatially variable viscosity. This was observed both in the aftermath of the Tohoku quake and in the recent Christchurch quakes in New Zealand, although in the Tohoku quake the tsunami damage far overwhelmed damage from soil liquefaction. As a secondary loss agent, soil liquefaction impacts total property replacement costs in the following ways: by damage from subterranean flooding, costs of land restoration, and in the case of large structures, damage from differential settlement (caused by spatial viscosity variations in the liquefied soil). In geospatial modeling of soil liquefaction potential, important factors to consider include the existence of a shallow ground water table; properties built on reclaimed land, near a river bank, or on poorly consolidated sandy soils that are most prone to liquefaction. Many of these risk factors are easily satisfied in urban areas where large commercial properties are usually built.

Business Interruption (BI)
losses are usually underestimated by models, because they underestimate the time period over which production facilities could remain damaged; and Contingent Business Interruption (CBI) losses are usually underestimated by models because they capture insufficiently well supply chain dependencies, location, and geographic factors.

These considerations point to logical next steps for Earthquake CAT loss estimation model developers to undertake as improvements in their models. While the Tohoku earthquake and the tsunami that followed was the most devastating CAT in history, it is worth remarking that, from the modelers' perspective, it was also geophysically the most well-recorded CAT of all time. Following the devastating Kobe quake of 1995, a large, dense, high-bandwidth, high-connectivity and high-sensitivity network of ground motion sensors was set up. This network spanned the area which was impacted by the Tohoku quake and tsunami, both on the ground and in the ocean, thus generating significant amount of data relative to the spatial distribution and magnitude of ground shaking intensity following the quake,both above ground as well as on the ocean-bed. In addition, following the Sumatra-Andaman earthquake-tsunami of 2004, a network of tsunami sensors and deep-water pressure gauges was also set up. The result is that a rich dataset is now available, which modelers can use to calibrate their ground motion loss estimate modules, and the correlation between earthquake moment magnitude with the size of the tsunami it can generate. However, on a larger scale, the lesson of the Tohoku tsunami quake is likely still to be that the historical record of tsunamis following earthquakes is as yet too sparse to enable confidence about the correlation between seismic moment magnitude and the temporal return periods. Nevertheless, CAT modelers can still proceed to remove the underestimation bias in the loss potential from secondary loss agents that was seen following recent earthquakes.

Friday, January 20, 2012

USDOE Issues Funding Opportunity Announcement for SMRs

The US Department of Energy (USDOE) issued a draft Funding Opportunity Announcement (FOA) this week, intended to support activities related to the design and licensing of Small Modular Reactors (SMRs), defined as reactors with an electric output of 300MWe or less; which can be manufactured remotely, transported to point of construction, with on-site assembly largely limited to system integration of components for operation.
Importantly, the USDOE is interested in designs with passive safety (e.g., against consequences of a nuclear accident) as well as inherent safety (e.g., against natural catastrophes such as earthquakes, windstorms or floods), in addition to designs with long inter-refueling periods, low capital cost outlays, low maintenance and operating costs, and high proliferation resistance. The stated intention is to support up to 2 reactor designs through the USNRC design and licensing process, with the ability to be deployed ‘expeditiously’ being an important merit criterion. 2022, a decade from now, is the target year for commercial operation.

Proponents may choose to pursue licensing from the USNRC under either 10 CFR 50 or 10 CFR 52. Stakeholders are encouraged to form consortia, and proponents are encouraged to form design-centered working groups (DCWGs) across the supply and value chains e.g., SMR manufacturers, power utilities, local bodies; and the activities funded by USDOE are required to draw at least 50% of their total resources required, from internal sources. The total amount of funding available from USDOE is estimated to be $452 M, subject to Congressional appropriations. The current draft FOA will be issued in final form after feedback from, and consultation with, stakeholders.